Berkshire Hathaway California Home Services (“BH”) recently announced that Realtor ® Laurie Wartik of Camarillo joined its Ventura, CA office in November, 2016 after having an association with another broker since 2014. The BH Ventura office, a corporate office rather than a franchisee, serves a wide area that includes Ventura and Santa Barbara counties, Malibu, the Conejo Valley and the San Fernando Valley. Operating from a corporate office, Laurie said, “….offers my clients a higher and more complete line of realty services. During 2016, the Ventura BH office matched more buyers and sellers of residential properties in Ventura County and the Conejo Valley than any other area brokerage.

Laurie and her husband are long-time residents of Ventura County, and also reside part-time in Palm Desert. Laurie is also a member of the Desert Cities Association of Realtors. “Having the opportunity to join Berkshire Hathaway Ventura is a special opportunity, especially at a time when the local housing market, while in short supply compared to needs, remains strong,” she added.

“This is a great time to become a first time home buyer, as well as for current homeowners to move up to a larger home to meet growing family needs,” Laurie pointed out. “I look forward to continuing to help families and individuals in the Central Coast area and Coachella Valley areas find that special property that will fit both their budget and their lifestyle,” she concluded.

Laurie Wartik may be contacted directly by calling 805-437-9521, emailing her at lwartik4re@gmail.com ; or by visiting her website at www.realestateagentlaurie.com

This acclaimed, semiannual conference gives the critical facts you need to make key decisions for your business, staffing and team inspiration in 2016. Gather the latest information, tools, and resources to propel your business farther, faster in 2016 and beyond.

The most important information that business owners
should walk away with from this event

How long the current economic expansion will last and when businesses will begin to meet more difficult challenges

A better understanding of which sectors and markets are growing and at what speed in Ventura County and California

Current and expected conditions in commercial lending markets, with insight delivered by renowned experts

Vision Economics works with John Faucher, Esq., an attorney in Westlake Village, CA who specializes in bankruptcy and tax law issues. Mr. Faucher has an active website on which he regularly posts articles of interest. This month we are happy to publish an article about a common practice about parents hiring their children to work in the family business. As Mr. Faurcher points out, there is a legal way to employ family members, and then there is the other way. Do beware, for the IRS may be watching.

The story

I love having my 18-year-old daughter work in my law firm. She’s smart and motivated. She gets to see law in action. She’s done wonders for my website, and she gets the mail out.

She keeps a timesheet. I pay her through a payroll company, which withholds funds for income and social security taxes, among other deductions.

Not every employer is as honest and real-world as I am about the employment relation with a child. Hiring your child is perfectly legal, in fact, I encourage it, but it must be done carefully and transparently. Some parents mistakenly believe that if they take some of their income and pay a child, they may take a deduction on the payment to the child and the child will pay tax at a lower marginal rate than the parent: a seeming win-win. Not so.

The IRS frowns on these schemes. The latest person to fall foul of the rules is a Ms. Patricia Diane Ross, who took her case to the Tax Court and lost: T.C. Summary Opinion 2014-68.

Ms. Ross owned a Schedule C business, Ross Professional Services, LLC, that helped government agencies staff their operations. She had three children, ages 8 through 15. The children, according to Ms. Ross, shredded paper, stuffed envelopes, copied, sorted checks, filed documents, put out the trash, carried equipment, and helped her shop for supplies. For these tasks, she paid the children. But she made some mistakes that came back to haunt her:

1. She paid the children in pizza. Rather than give the children a paycheck, she claimed she kept a ledger of how much they had earned and deducted the cost of their restaurant meals and a tutoring/play activity service from that ledger. These expenses sounded to the IRS and the Tax Court judge more like the regular kind of support that a parent is expected to give to her children.

When I represented the Commissioner of Internal Revenue, I came across a family that paid their minor children a very regular wage: $5,000 twice a year, two days before the children’s private tuition bill was due. The tuition bill got paid out of the children’s accounts.

Lesson one: if you employ your children, pay them in money rather than support.

2. She did not pay a regular hourly wage. Dividing “wages” paid by the hours Ms. Ross reported for each kid resulted in an hourly wage varying from $4 to $30 with little correlation between the child’s age, skill, or task, and the wage paid.

Lesson two: if you hire your child, keep good time sheets and pay a regular wage.

3. She did not withhold Federal income tax or other deductions, saying that the children did not need to file tax returns. But anyone who makes more than the standard deduction ($6,200) plus the exemption amount must file a tax return. When the child is being claimed as a deduction on Mom’s tax return, the exemption amount is zero.

4. The children got paid for chores: “the activities performed by petitioner’s children seem analogous to . . . washing windows, cleaning screens; shoveling snow; moving grass; tending shrubs, trees, and underbrush; assembling papers; picking up mail.” The Court found these activities sounded more like parental training and discipline, not services performed by an employee for an employer.

Lesson four: pay your children only for tasks that advance the business, not for tasks that advance the household.

5. She did not give the children their own bank accounts. Well, the children actually had bank accounts about 200 miles away (where their father lives?), but Ms. Ross said she was too busy to open local accounts for them. Thus, she said, it was “more convenient” to pay for things as the children directed her to, matching spending against their “earnings.” It does not appear that the judge found this explanation convincing.

In our last newsletter, Karen L. Gabler, Esq. of the law firm of LightGabler, LLC of Camarillo, employment law specialists, offered us insights into how to deal with job applicants, adorned with tattoos, nose rings, extra bushy beards and similar body “enhancements,” should be treated in terms of meeting a company’s dress code.

Ms. Gabler told us that in developing a company-wide grooming/appearance policy prohibiting tattoos and piercings, employers should consider the business reasons behind any such prohibitions, as well as the specific job duties of the individual employees. For example, an employer might wish to prohibit visible tattoos for employees who interact with customers. In that case, a janitor who works after hours and never interacts with customers might be permitted to have visible tattoos, whereas a customer service representative might be restricted from having visible tattoos.

As the article noted, employers are entitled to hold prospective new employees to the terms of an enforceable dress code, especially for those meeting with customers, clients or patients. Well, that is good direction for those meeting with prospective employees in an interview setting. Some of our readers, however raised the question of how to deal with the employee who, at the time of employment reflects a “clean appearance,” then moves into the world of tattoos, nose rings, etc.

In discussing this with Ms. Gabler, she confirmed that with an enforceable dress code in place, the existing employee who changes his/her appearance may be held to the same standards as applied to them when hired. For those who, subsequent to being hired, violate the dress code, and continue to interact with the company’s clientele, such an employee may be released for violating the dress code, or given the choice of complying with company policy. As a reminder, however, there are two key tests, they being: 1) Employee interacts with clientele, and 2) The physical adornments are not religious based.

For further questions, please contact us at Vision Economics at gw@visioneconomics.net, or by calling 805-987-7322.

We are at or near the peak of the economic cycle. That’s my opinion. We could also be in for a longer period of expansion than normal, because the sluggish period of recovery during this economic cycle was much longer than expected. If so, then my thoughts about the peak could either be premature or the peak could evolve into a longer running plateau of economic growth.

Expansions generally end when the economy overheats, occurring when the labor market is at full employment and businesses are operating beyond their capacity. Inflation begins to rise along with interest rates, and consumers tend to overspend and become debt laden.

We are not there yet. The labor markets are not yet at full employment, though that condition is rapidly approaching. For anyone over 25 years old, the unemployment rate is effectively “full.” And this will translate into rising wages and salaries this year and a higher rate of inflation in 2016.

We are expecting the Federal Reserve to begin raising the federal funds rate this summer, as early as June. Treasury rates are expected to move higher along with mortgage rates by the fourth quarter. The 30 year conventional mortgage yield is forecast to push past 5 percent next year.

Looking for Weakness

The economy is now in its best condition since the end of the Great Recession. Consequently, we are gradually turning our attention from how strong the current economic expansion will be to a search for any weaknesses, i.e., potential excesses in household spending and debt, financial lending practices, or over extended asset prices.

Household debt is currently at the lowest level since reliable records have been kept. The amount of credit card debt fell to the lowest level since 2002. This is one of the key reasons that the U.S. economy is outperforming much of Europe and Japan. Corporate debt as a percentage of total corporate equity is also at a 12 year low.

Household debt is the sum of mortgage debt plus consumer debt including credit card, auto, and student loan payments. Currently, household debt as a percent of disposable income is at its lowest level in more than 35 years

In general, households and businesses are in better financial shape to spend this year and next. Banks are in a better position to lend. These conditions in concert, along with likely increases in wages and salaries, point to a predicted 3 percent increase in total spending this year, a meaningful improvement over 2013 and 2014.

Asset Prices: The Stock Market

Another bubble Building?

The stock market run has been fairly sharp since the beginning of 2013. And to date in 2015, the financial markets continue to move higher. Adjusted for inflation, the S&P 500 is currently at its highest level ever. The Nasdaq reached a near all time record close on March 20, and the Dow Jones Industrial Average is just 300 points from it’s all time record high set on March 2, 2015.

As of April 7, the S&P 500 P/E ratio stood at 20.29. This is the twelve month trailing price to earnings version of the ratio. The average P/E ratio for companies comprising the index since 1979 is 20.6. The Dow Industrial Average P/E ratio is 16.33, just slightly above the year-ago level. The obvious question is whether current P/E ratios are worrisome, indicative of another bubble? There is no shortage of current online debate on this subject, which can get quite complex.

The stock market numbers are worth following closely to ascertain the degree of speculative behavior that might be infiltrating current values. But it’s not an immediate concern because expected earnings reports for the first quarter of 2015 appear to be strong.

No Leaks in the Dike

Interest rates remain low, gasoline prices are falling again, and the dollar continues to strengthen. The economy is stable and growth rates for most of the important indicators may reach their best levels this year. We’re looking for initial problems, but we don’t see many at this time. So enjoy the spring.

We are pleased to offer the current issue of the monthly newsletter of the California Economic Forecast written by its director, Mark Schneipp. Dr. Schneipp, based in Santa Barbara, CA is one of the most quoted economists in California’s central coast region that encompasses Ventura, Santa Barbara and San Luis Obispo counties.

Dr. Schneipp is known for his comparative analysis, thus the cold weather map below, not to mention his dry wit. His insightful predications of future economic performance are usually as accurate as any in the “industry.” Of late Schneipp’s views have been more optimistic and accurate than those of many analysts reading the same economic data.

Hopefully Dr. Schneipp’s comments will make you feel better economically, even if you are freezing in one of the very cold climates depicted below. We wish you warm economics and a warm spring to come!

Source: weather.com/maps/current

Throughout the Great Lakes Region and the Eastern Seaboard, there is record or near record bitter cold. Negative temperatures are being recorded in more than 20 states. The ferocious arctic front is diving as far south as the Gulf of Mexico. Atlanta recorded a high of 26 degrees and there are freeze warnings in Florida. The map shows the wind chill temperature on February 20 at noon eastern time. This is clearly the coldest period of the year or even the decade for most eastern cities. Meanwhile the temperatures in Ventura County during January hovered in the 70 degree range.

Economic Heat

The dark pull of the Great Recession has now let go. The economy is growing at its fastest rate since the mid 2000s and the rate of job creation is prodigious. In fact, it’s the strongest growth since the technology boom 15 years ago.

More than a million jobs were created over the last 3 months. And there are now more open work positions than hires each month. Employer surveys indicate that nearly one-half of respondents say they are hiring.

Consumers are benefiting from more job opportunities, lower gasoline prices, extremely low interest rates, a strengthening dollar, rising equities in their homes, and near record stock market values. And soon, they’ll be the general recipients of higher wages and salaries.

Prospects for increased housing production this year will generate even more employment opportunities, higher wages, and faster overall growth in the national, state, and regional economies.

While bitter cold grips much of the nation, overall economic growth is the hottest we’ve observed since 2005.

In California, the labor market is creating jobs at a faster pace than the nation. Consequently, the unemployment rate is falling like a rock. More homebuilding this year will create more jobs. Demand for both new and existing homes will increase though only gradually. So much of the “millennial” population currently lives in apartments or with their parents and are not buying homes.

But this condition will change, albeit slowly. So expect a longer drawn out expansion of housing, more new jobs associated with housing, and more inventory from which to choose. Higher interest rates will also accompany these trends as the Federal Reserve gets ready to push rates higher during the summer months.

Well, it’s been about a decade since the last time the economy was operating at full employment. And though job growth won’t immediately slow when the economy reaches full employment, we may atypically be facing a scarcity condition for workers in some sectors. There is some likelihood that the economy’s biggest problem by 2017 will be a lack of qualified labor.

Anything Cooling this Year?

We don’t expect much cooling this year, unless you’re talking about winter weather in anyplace but the west coast. The current evidence strongly shows escalating momentum in the labor and consumer markets. And when you combine that with gasoline prices that will stay low, interest rates that will stay low, and the U.S. dollar that will continue to strengthen this year, you get near perfect storm conditions that produce an economy growing above it’s potential.

Now, barring any major and unexpected calamities in the geopolitical arena, the economy should remain in high gear for most of the year. As housing ramps up this year and into 2016, it should offset sectors that may be dragging, such as our export sector due to the strong dollar.

“Integrated marketing” is not a new concept. It is a fundamental strategy that business students study and experienced marketers practice intuitively. But it seems to us like there has been a lot more buzz about the term lately.

All the pieces of your marketing puzzle should work together.

Integrated marketing is a term I have used since the early ‘90’s when selling Major League Baseball programs and it always amazed me that even big business did not implement this strategy with greater frequency.

Let’s remind ourselves of what the term means. “Integrated marketing” is defined by BusinessDictionary.com as a “Strategy aimed at unifying different marketing methods such as mass marketing, one-to-one marketing, and direct marketing. Its objective is to complement and reinforce the market impact of each method, and to employ the market data generated by these efforts in product development, pricing, distribution, customer service, etc.”

For the marketer, “integrated marketing” works when you have a single brand identity that is so strong that it remains consistent and recognizable regardless of the medium. The biggest, most powerful brands in the world are great at this. Think Starbucks, McDonalds, Target.

Back in 2012, the May issue of BusinessWeek included an article called “Integrated Marketing: If You Knew It, You’d Do It” in which fragmentation is described as “public enemy No. 1” in today’s marketing environment. The proliferation of marketing platforms has certainly contributed to this fragmentation, with social media being the primary culprit.

If you are going to use all of the marketing channels available to you, you’re going to need help, and that can mean multiple people working in different mediums. Developing and sticking to a single brand identity across platforms can be very challenging.

Now that the bloom on the rose of social media is starting to fade, we see marketers taking a fresh look at traditional media and asking themselves how they make all their new tools work with the old ones.

We believe that marketing success comes not from focusing on any specific marketing platform and not from trying to use all of them.

Know Your Brand

For any marketing program to work, first and foremost you have to know your brand. What is the image you want to present to the world?

Know Your Market

Second, you need to know who it is you want to reach. Who is your target market?

Evaluate Platforms Based on Potential ROI

Now you’re ready to evaluate which platforms will help you best reach your target markets and prioritize them based on potential ROI.

Different platforms call for a different tone. On Facebook you want to be fun and friendly, magazine ads must be visually gripping, print publications give you a chance to present a longer, more informative message.

But you must have a consistent voice across all platforms as if one person was in many places at one time, reinforcing your connection to a specific customer each time you come in contact with him or her.

Regardless of your budget, you can and should ask how you can diversity the marketing platforms you are using while maintaining and reinforcing a strong brand identity.

During the Great Recession of 2008-11, the vacancy rate in office buildings in large parts of California reached unheard of levels. In the Conejo Valley, straddling the Los Angeles and Ventura county lines, for example, vacancy rates reached 25 percent for a period. Based upon some current data, vacancy rates are still in the high teens. As a result, two things occurred, they being that property owners started offering new tenants excellent, but shorter-term lease rates, and the layout of office space began to change in order to meet demands of some tenants for more open and flexible office space.

The open space concept has contributed to a notable reduction in tenant build-out costs that otherwise would be reflected in tenant lease rates. Additionally, the open space concept accommodates more employees, and secondly purports to foster more of the “team spirit” within the business. On the latter, the jury is still out. This office knows of several firms who tried the open space office concept, only to revert back to the more familiar fixed-wall office format.

In Ms. Mazirow’s article below, she focuses on some of the specific changes she is observing as the office market moves back to a healthier occupancy level. Saved for a future article is the issue of why vacancy rates remain high, but we do know that one reason relates to the number of firms, especially professional firms, that have merged with others or which have reduced their staff space needs. As well, more individual professionals are engaging in strategic relationships in which, as it relates to office space, each works in their own space, many of which are part of the growing home office segment.

Article:

Welcome to the brave, new world of office space in the Los Angeles market. It is comprised of neighborhoods, communities, huddle spaces, hoteling, benching, pathways, and — above all —collaborative space. Oh, and let’s not forget the ability to bring man’s best friend, our beloved dog, to work.

Today’s office space landscape is far different than it was just a few years ago, and the driver in the Los Angeles area is the desire of tenants to secure what is known as creative office space. Although originally sought only by technology firms, this trend has gone mainstream with law firms, real estate companies, accounting organizations, and insurance companies now demanding corporate office space that is 180-degrees opposite of “our father’s office space.”

New Must-Haves

Often the creative office environment includes an “open ceiling” exposed plenum, which is the area between the structural floor and the dropped ceiling that houses air conditioning, heating ducts, and insulation. Although the plenum is typically unattractive in appearance, it is expensive to change traditional space into an exposed environment.

Clusters of open spaces are the hallmark of creative office space versus a row of offices along the window line with secretarial or staff bays on the interior in traditional corporate office space.

This open landscape is designed to promote interaction and collaboration among employees or departments, known as “neighborhoods,” within an organization. There often is no specific office assigned to a particular individual. Employees “plugin” and “log on” and perform their work task at different areas within the premises.

Private conversations take place in a “huddle” area, which is often simply an alcove. Offsite employees who drop into the office and all visitors in the office are said to be “hoteling.”

Creative office space has a lack of walls to create enclosed spaces. This all seems like an easy, efficient way to provide workspace. Unfortunately, it isn’t. Tenant improvement costs are incurred opening up the ceiling to expose the plenum areas and allocated for demolition of the previously designed traditional offices. Core drilling into concrete floors for electrical and data drops can get expensive but is critical in these open landscape plans. Often “soft walls” made of fabric, which can be decorative to enhance the atmosphere, may or may not be movable and used within the premises to define a specific area.

Generally, creative office space in Los Angeles translates into to a boatload of employees. Therefore, density has become a major topic of discussion during the lease negotiations, and the load usage of electricity is a hot button issue due to the number and variety of gadgets that employees use daily in this office environment.

Parking, Kitchens, Dogs, Bikes

Parking also is another important issue that must be addressed in lease negotiations. Often, the standard of three parking spaces for each one thousand square feet leased, known as the 3/1,000 Rule, is not adequate and was undoubtedly established when the building was constructed. Landlords can later go back to the city and request a modification, but this often is difficult to achieve. But there are other options such as re-striping the parking lot to include more spaces, providing a valet service to jockey cars into other space around the building, or converting reserved parking spaces—especially those that are vacant the majority of time—into unreserved ones to accommodate daily employee and visitor demand.

Kitchens no longer only satisfy the need for food in creative office space, and they have replaced conference rooms as significant topics of negotiation. The “look” and “brand” that the organization wishes to display to the world is now imprinted in the kitchen area. Often the kitchen will be the central point within the premises, no longer regulated to an interior windowless space, but the premier lounge location. Kitchens are gathering areas to work, create, and collaborate.

Under the Rules and Regulations section of a lease, a tenant will normally see the prohibition of dogs, but the creative office user is big on dogs. This can be a difficult but humorous negotiation. We just completed a lease that hinged on how many dogs are allowed into the building, how many times a week one dog can enter the office, and how much it can weigh. There usually is a prohibition on bicycles – the transportation of choice for the creative office user. Institutional ownership of buildings is more challenged to achieve a comfort level of permitting dogs versus bicycles, where the landlord provides racks and bikers the locks. But we’re seeing new buildings providing restrooms with lockers and showers.

Window line also is critical because users want to be as close as possible to the outside environment and natural light. Users also want easy access to parking and amenities; restaurants within walking distance are a must.

Multi-story buildings from in the 1970s are very challenged to accommodate creative office space given the architectural design that was popular then and their location in “concrete jungles,” but we are seeing large, single-story industrial buildings redesigned for creative office space. Additional parking and exterior green areas for gathering are being incorporated into these projects, but they come at significantly higher rental rates.

Conclusion

The world of office space continues to evolve, but it would have been hard to imagine a few years ago that a transaction would come down to how many dogs may visit your office per week and how much they are permitted to weigh. While it sounds like this “could only happen in Los Angeles,” the trend of creative office space has spread to San Francisco, Seattle, Houston, Chicago, New York City, and Miami, so get ready for a new and fascinating era of working in an office.

For additional information on the changing office market, please call us at Vision Economics, 805-987-7322, or Mazirow Commercial at 805-449-1945. Mazirow Commercial has been specializing in negotiating lease terms on behalf of tenants for more than twenty-five years.

Retail and service businesses are receiving an increasing number of employment applications from a growing group who distinguish themselves with tattoos, nose rings, unkempt beards and other “adornments.” Many employers are concerned about customer responses to employees with such appearances, believing employees with direct customer contact may not be good for business.

Some of our retail and restaurant clients are not sure, within the ambit of state and federal law and regulations, how to handle the applications. Accordingly, we asked our friends at the law offices of LightGabler, LLC in Camarillo, CA, employment law specialists, to offer some guidance. Karen Gabler, one of the senior partners of the firm offers us some direction on the issue.

Report:

As tattoos and multiple body piercings become more “mainstream,” employers are increasingly faced with the question of whether they can lawfully restrict tattoos and body piercings in the workplace based upon business considerations or personal preference.

California law provides employers with the flexibility to establish “appearance” rules in the workplace, as long as those rules do not adversely impact protected personal characteristics. Employers are entitled to restrict visible tattoos and body piercings, as long as those restrictions are based upon legitimate business concerns and not upon any discriminatory practice.

In developing a company-wide grooming/appearance policy prohibiting tattoos and piercings, employers should consider the business reasons behind any such prohibitions, as well as the specific job duties of the individual employees. For example, an employer might wish to prohibit visible tattoos for employees who interact with customers. In that case, a janitor who works after hours and never interacts with customers might be permitted to have visible tattoos, whereas a customer service representative might be restricted from having visible tattoos.

Legitimate safety considerations may form a valid basis for the restriction of body piercings. For example, an employer may prohibit dangling or hoop earrings in a factory environment where jewelry could be caught on machinery. Naturally, it would be more difficult to claim that visible tattoos pose a safety risk in the same environment.

Grooming/appearance policies also must be gender-neutral and consistently applied to appropriate personnel. For instance, if an employer chooses to restrict piercings to no more than two piercings per ear, that standard must be applied to men and women on an equal basis, rather than permitting women to wear earrings but restricting men’s ability to do so.

Where an employer’s rules against visible tattoos or piercings implicate an employee’s sincerely-held religious beliefs or practices, the employer cannot restrict the employee unless it would cause undue hardship to the employer. Instead, the employer must consider reasonable accommodations to address the employee’s religious needs. Begin by having an interactive discussion with the employee about the basis for the tattoo or piercing, ask whether religious beliefs would prevent the employee from covering the tattoo or removing the piercing, and brainstorm on whether there are reasonable accommodations that would allow the employee to express his religious beliefs.

Employers should implement grooming/appearance policies addressing any restrictions the employer wishes to impose, to avoid misunderstandings or inconsistent application of any restrictions. Those policies should also include a statement that if any tattoo or piercing implicates religious beliefs or practices (or other applicable protected characteristic), the employee should see management or human resources to discuss the possibility of a reasonable accommodation.

Karen L. Gabler is an employment attorney at LightGabler LLP, a business law firm in Camarillo. Karen represents employers and management in all aspects of employment law, providing advice and counsel to business clients and defending employers against employee complaints. For more information, go to www.LightGablerLaw.com.

Since November 2014 there has been significant discussion about the short and long-term effects of dramatically lower vehicle fuel prices on the American economy, and even on the world economy. From this vantage point, it looks positive in the shorter term, but with some caveats.

Under current pricing, a hypothetical California family that drive vehicles that get 25 miles per gallon, and purchase an average of 75 gallons monthly at $2.35 per gallon, will save about $100 a month, when compared with the average price of $3.70 per gallon in place just last fall in Southern California. That annualized savings of $1200 is important to many families and certainly to the local economy. Some families will have the discipline to put the funds into savings, or into reducing debt, while others will intentionally or otherwise spend the savings in the local economy. Those actions are all a good thing.

From the standpoint of businesses, a reduction in fuel costs will have many levels of benefits, most apparent of which is the reduction in all costs associated with the delivery and shipping of everything from raw materials to finished products. With fuel costs held in check for the time being, companies may find greater profits for shareholders, and even spread some of the savings in the form of improved employee wages and benefits. United Parcel Service, FedEx and moving companies, for example will save thousands of dollars daily that can either be passed along to customers, or that will serve to hold delivery rates in check. Major companies such as commercial airlines will benefit from the savings that will flow right down to the bottom line. In effect, lower fuel costs will help hold future inflation in check. These are good things too.

In another other realm of good news, the 50 percent drop in international oil prices during the last few months has begun to hurt some neighborhoods that are less than friendly to America. Think Russia, Iran and Venezuela. These three states mainly fund their national budgets with oil money. There are likely few tears being shed around the Western world for the economic challenges now faced by these autocratic regimes.

What is helpful to understand, however is that there is no “free ride” for many. Lower oil prices also affect our own economy, as well as some of our important allies. Canada, Mexico, the United Kingdom, Norway and some West African oil exporters are also going to suffer budget impacts. Fortunately for most of them, these countries have more diverse economies that are less dependent on oil exports.

Here in the United States, we have a number of states that are major oil producers. Texas, North Dakota, California, Alaska and Oklahoma are the top producers, in that order. Each looks to strong oil revenues to maintain a healthy economy. In the area of “be careful what you wish for,” there are already news reports of thousands of job layoffs in the American oil industry itself, along with those that service that industry. We are already seeing layoffs in Texas, North Dakota and in the Bakersfield, CA area. There are more to come. The job layoffs are not good news, although if one compares the value of wages lost versus the overall gains of fuel savings in the economy, lower oil prices clearly win out. The challenge is that if you are one of those losing a job, that puts one in a crisis mode. That is not good.

Recent press reports reflect that even with low fuel prices only in place for a few months, some Americans are already thinking that fuel efficiency and conservation are now less important. The increase in the purchase of larger, less fuel efficient vehicles in the US has already been reported, as has a decrease in consumer interest in fuel efficient vehicles. This sends the wrong message to our fellow citizens and to the world. This is not a good thing.

There is one more aspect to the oil price issue that warrants addressing. That relates to OPEC, Saudi Arabia in particular. The press has been replete with reports that the Saudis are looking to maintain market share at almost any price. Their $750 billion in dollar reserves confirm that they can afford it. Some Saudi officials have been candid enough to admit that they oppose America’s move towards energy self-sufficiency. This is not good for OPEC, and if the Saudis drive the oil price down further, it may be a challenge for America as well.

It is no secret that the advent of American shale oil extraction, where previously uneconomical to recover, is now a significant threat to OPEC. If the goal of the Saudis in particular is to drive oil prices down low enough to make the more expensive process of fracking for shale oil uneconomical, then over a period of time, less oil will be available on the world market. Oil prices will then begin to rise again. As well, the faster the economies of Germany, India, Japan, and China recover from their respective reduced economic growth, the faster additional consumption may drive up international oil prices.

From the macro point of view, $46 oil is likely not sustainable long term. Prices may dip some more, but the sense here is that prices will begin to firm as the economies of the industrialized nations begin to recover from their present malaise, perhaps later in 2015. That too would be a good thing, even if that drives oil prices somewhat higher.

We won’t know for awhile how much the oil markets have changed. Markets will remain subject to political shocks, especially in the Middle East, but new American oil coming on line, whatever the international shocks may be, should lessen the impact on world oil prices than they have previously. That should be a good thing too.